System and method for creating parity on close orders

Abstract

An automated system for creating parity on close orders in an exchange configured for trading securities or derivatives is disclosed including an electronic trade engine operative to receive an order for a security or derivative at the exchange, the trade engine further operative to disseminate a request for a price message to a plurality of market makers quoting a class in response to receiving the order, wherein the request for a price message includes a parity amount for the order; an electronic book in communication with the electronic trade engine, the electronic book operative to store at least one order received by the electronic trade engine; and wherein, in response to the request for a price message, the electronic trade engine receives at least one price message that includes a fee in addition to the parity amount.

What is claimed is: 
     
       1. An automated system for creating parity on close orders in an exchange configured for trading securities or derivatives comprising:
 an electronic trade engine having a processor operative to receive a parity on close order from a customer for a physically settled call option expiring on a day of receipt of the order at the exchange, the parity on close order corresponding to an order of a quantity of the call option for a fee above a parity amount calculated at a close of the day of receipt of the order, wherein the parity amount comprises an amount of a closing price of an underlying of the call option that is greater than a strike price for the call option; 
 wherein the processor is further operative to disseminate a request for price message to a plurality of market makers quoting a class of securities or derivatives corresponding to the order in response to receiving the order, wherein the request for price message includes the parity amount for the order; 
 a storage device having a database in communication with the processor, the database operative to store at least one order received by the processor; and 
 wherein, in response to the request for price message, the processor receives at least one response message that includes a fee in addition to the parity amount. 
 
     
     
       2. A method for creating parity on close orders in an exchange, the method comprising:
 receiving a parity on close order from a customer for a physically settled call option expiring on a day of receipt of the order at the exchange, the parity on close order corresponding to an order of a quantity of the call option for a fee above a parity amount calculated at a close of the day of receipt of the order, wherein the parity amount comprises an amount of a closing price of an underlying of the call option greater than a strike price for the call option; 
 routing the order to a processor of an electronic trade engine; 
 the processor of the electronic trade engine disseminating a request for price message to a plurality of market makers quoting a class of securities or derivatives corresponding to the order, wherein the request for price message includes the parity amount for the order; 
 receiving at least one response message at the processor of the electronic trade engine that includes a fee in addition to the parity amount; and 
 the processor of the electronic trade engine allocating at least a portion of the order to a sender of the at least one response message.